The ins and outs of life insurance riders

Insurance policies are among the most customizable of financial services, thanks to something called riders. Let’s take a look at some of the most common insurance riders.

As with any major financial decision, before you get life insurance, it’s a good idea to research all your options. While there are probably a gazillion life insurance policies to choose from, each offers different levels of coverage. 

After choosing the package closest to what you want, you can personalize your policy with a rider.

Not an insurance riderA life insurance rider is not a character like the Lone Ranger or Zorro or the Black Riders of Middle Earth.  In this case, a rider is a feature that can be added on to your life insurance policy to make it better suit your needs. You can add as many riders on your policy as your insurer will allow, but bear in mind that you will pay extra for each rider. So best to think carefully about how much each one is likely to benefit you.

Guaranteed Insurability Rider

As the name suggests, this rider guarantees your insurability. If you want to renew your policy, this rider allows you to do so without a medical exam. You never know how your health will change as you get older.  This rider can help you remain insured, even if your health starts to fail.

Spouse and Children’s Insurance Rider

This rider allows you to buy added coverage for your spouse or children on your policy.  If you have a family, this should be high up on your list to consider but this is NOT an obvious choice, either.  Before making the call on this one, you might want to read this article on the pros and cons of insuring your child and perhaps this short article, as well.

Withdrawal Provision Rider

This rider allows you to withdraw the cash that has accumulated on your policy, giving you access to funds when you need them. Keep in mind that when you withdraw cash, your life insurance is reduced by the amount you take out.

Accidental Death Rider

If you die from an accident, this rider will increase the money your beneficiaries receive. Read the terms and conditions carefully; what is classed as ‘accident’ by your insurer may be restricted (if you die too long after an accident, for instance), and might differ from one company to another. This rider can sometimes offer additional payouts for loss of limbs and loss of sight.  Here is a definition of accidental death.

Accelerated Death Benefit Rider

I know anything that starts with”accelerated death” might sound creepy, but this rider accelerates the benefits, not the death. If you become terminally ill, this rider will provide an early payout up to a certain percentage of the value of the policy. Read the terms and conditions for what is classed as ‘terminal illness’ and for when payouts are offered.  You might find you need the money more while still living than after you’ve died.

Waiver of Premium Rider

If you become totally disabled and can no longer work, this rider will protect your life insurance policy even – if you can  no longer afford to pay your premiums. Bear in mind that this rider usually expires when you turn 65 (in theory, nobody works after 65 anyway – Ha!). What your insurer classes as ‘disability’ may vary, so check the small print.

Disability Income Rider

Again, this rider comes into play if you become totally disabled and can no longer work. However, this rider provides a regular income from the insurer (similar to income protection insurance). Benefits will be paid out for an agreed-upon period of time, as stated in the policy. Again, what your insurer considers to be a ‘disability’ may vary, so read the small print.

Family Income Benefit Rider

This rider pays an ongoing monthly income for an agreed-upon period of time when you die. This could be a life-saver to your family if they rely on your income to make ends meet.

Return of Premium Rider

If you outlive your life insurance policy, this rider returns all premiums you paid into the policy. This can come in handy if you happen to outlive your policy.  Just don’t forget that you pay higher premiums for the privilege.  You will have to do some calculations to check whether this one is likely to be worth the cost.

You might not need or want most of these riders.  But you probably will want at least one or two.  It is worth the little time it takes to make an educated decision.  And then make sure to review that decision every five or ten years.  You don’t want to be paying for a rider that no longer applies.  Nor do you want to miss a rider that you now need.

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